Coming Soon: Higher Business Payroll Taxes
Employers are expecting 'significant' increases in unemployment insurance payroll taxes
The state of Michigan owes the federal government $3.8 billion in unemployment insurance loans and will have to start making $150 million a year on interest payments if Congress doesn’t extend a waiver by Friday.
Governor-Elect Rick Snyder went to lobby Congress recently so it could waive the interest payments on the loan, Mlive.com reported.
Snyder’s office didn’t respond to a phone message or e-mail.
In Michigan, businesses pay for the first 26 weeks of unemployment benefits. After that, it’s a mix of businesses and the federal government that fund the various extensions.
The state borrows money from the federal government when the unemployment fund is exhausted, and that has to be paid back by the businesses.
“Barring any changes, employers are going to see significant increases in unemployment insurance payroll taxes,” said Charles Owens, the Michigan director of the National Federal of Independent Businesses.
Some business could pay hundreds of dollars a year per employee in taxes to pay off that debt.
Only California has borrowed more money than Michigan to pay unemployment benefits, according to the National Conference of State Legislatures.
Michigan started borrowing as far back as September 2006 while almost every other state didn’t start tapping the feds until 2009. South Carolina and Indiana were the next earliest dates and they started borrowing in December 2008.
According to the National Federation of Independent Businesses, the latest unemployment extension recently approved will be paid for by the federal government and not go on Michigan’s tab.
According to the state, more than 800,000 people received $5.3 billion in unemployment benefits through November, 2010. That included all extensions.
Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.
The Rose-Colored Glasses of Political Dusk
In a series of opinion editorials, outgoing Gov. Jennifer Granholm has painted an extremely rosy picture of the state that led the nation in unemployment for a sizable chunk of her term. Her newest article is no exception to this rule, so a reality check is in order.
In an "Open letter to Michigan citizens," the governor starts by noting that this past decade has been difficult:
Notice that Gov. Granholm does not list "jobs" as one of her administration's "priorities," and rightfully so: Michigan's job losses have been a disaster over her term, and she probably does not want to draw attention to this. Instead, the governor talks about "diversifying," "educating" and “protecting” — terms that sound good but are harder to measure.
Next, the governor notes how she worked for her goals. "To create jobs and diversify our economy, we targeted six emerging sectors for growth: clean energy, advanced manufacturing, life sciences, homeland security and defense, tourism and the film industry."
Gov. Granholm and her staff followed the example of every previous governor back to Kim Sigler in 1947, "targeting" a handful of industries with which they could "diversify" the state's economy. Ironically, this is exactly the opposite of what diversification really means. Indeed, the select areas targeted by the administration are responsible for only 0.25 percent of all new jobs created in the last decade.
Gov. Granholm concludes her article on a few high notes, notably, "Our unemployment rate this year has dropped three times faster than the national rate."
But since Michigan lead the nation in unemployment for 49 straight months, this is not much of a feat. It is less difficult to improve from last place.
Like most politicians, the governor has consistently taken credit for all the good and shifted blame onto others for all the bad. Gov. Granholm and her staff have repeatedly blamed Michigan's "lost decade" on the decline of manufacturing and explained that her two terms have "laid the foundation" for the future economy by engaging in the above-mentioned economic policies.
Yet as Michael LaFaive has pointed out, Indiana had an economy even more reliant on manufacturing than Michigan, but did not suffer the decade-long recession. In fact, Indiana welcomed a new auto manufacturer in 2008 and has had an unemployment rate far lower that of its northern neighbor for the entire decade.
Gov. Granholm's exit interviews illustrate something written by economist Richard Fulmer:
Most people deal with the real world, and Michiganders shouldn't be convinced that the economy right in front of their faces is a sign of progress.
Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.
Love CapCon?
The best way you can help support our work is to become a donor. Give monthly or one-time. What do you say — buy our reporters a cup of coffee?
Have a coffee on me! Already a supporter